Impact of SADC Free Trade Area on Southern Africa’s Intra-Trade Performance: Implications for the African Continental Free Trade Area

Published date01 February 2024
AuthorBusani Moyo
Date01 February 2024
Subject MatterArticles
Impact of SADC
Free Trade Area on
Southern Africa’s
Implications for the
African Continental
Free Trade Area
Busani Moyo1
The main raison d’être of the Southern African Development Community
(SADC) Free Trade Area (FTA) implemented in 2012 was to inter alia boost
intra-regional trade and promote regional trade integration. The low levels of
growth and mixed trade performance of countries, eight years after, raises ques-
tions about the success of the FTA. The success of the recently launched African
Continental Free Trade Area (AfCFTA) partly hinges on the performance of the
regional FTAs like the SADC FTA. This is because it is unlikely that the African
Union through the AfCFTA will achieve continentally what regional economic
communities failed to achieve at the regional level. We use a gravity model as
well as the difference in difference estimator to evaluate, ex-post, the impact
of the SADC FTA on total and sectoral intra-exports. Using data from 2001 to
2019, results show that the full implementation of the SADC FTA did not signifi-
cantly affect export performance with the export difference between countries
that joined the FTA and those that did not being insignificant. These results do
not change even when using sectoral exports.
JEL Codes: F1, F13, F14, F15
SADC FTA, intra-trade, gravity, DID, AfCFTA
Foreign Trade Review
59(1) 146–180, 2024
© 2023 Indian Institute of
Foreign Trade
Article reuse guidelines:
DOI: 10.1177/00157325231184669
Department of Economics, University of South Africa, Pretoria, South Africa
Corresponding author:
Busani Moyo, Department of Economics, University of South Africa, Preller Street, Pretoria 0003,
South Africa.
Moyo 147
The Southern African Development Community (SADC), established through the
SADC treaty of 1992 in Windhoek, is a regional economic community (REC) made
up of 16-member states, the fourth largest African REC in terms of population but
third in terms of the gross domestic product (GDP) (World Development Indicators
[WDI], 2022). The fact that 16 out of 46 Sub-Saharan African (SSA) countries con-
tribute 37% of SSA GDP suggests that SADC is not only one of the biggest eco-
nomic regions in the Sub-Sahara but is also the continent’s growth pole.
Although SADC has been growing steadily as a group, there is so much hetero-
geneity in the economic performance of member states and this compromises the
region’s economic convergence and the degree of economic integration. South
Africa has always been the region’s economic powerhouse, accounting for the
largest share of SADC’s GDP at about 51% followed by Angola at 15% (WDI,
2022). All the other countries except the Democratic Republic of Congo (DRC)
and Tanzania contributed less than 4% to SADC GDP each in 2019. Annual GDP
growth has also varied greatly from country to country and for the period 2011 to
2020, Mozambique, DRC and Tanzania were the only countries that grew by at
least 5% whilst South Africa and Angola grew by less than 2% (WDI, 2022).
Thus, all countries are growing at less than the 2013–2018 SADC’s GDP macro-
economic convergence target of 7% per annum (AfDB, 2019).
Trade promotion is one of the economic drivers the SADC region is using to
enhance economic development, diversification, industrialisation and integration of
the region. For the period 2011–2019, in all the countries except Tanzania, trade as
a percentage of GDP was above 60%, but in countries like Lesotho, Mauritius,
Mozambique and Seychelles (WDI, 2022), it was above 100%. SADC countries
appear to import more than they are exporting and all of them except eSwatini and
Botswana have consistently been running negative current account balances.
Malawi, Mozambique and Seychelles are the countries running relatively large cur-
rent account deficits above 16%, which is also higher than the region’s convergence
target of 9% (AfDB, 2019; WDI, 2022). SADC continues to trade more with the rest
of the world than with itself. For the period 2001–2011, the region exported about
84% of its products to the world market, and this share dropped slightly to 78%, for
the period 2012–2020. Thus, the introduction of the SADC Free Trade Area (FTA)
in 2012 did not significantly change the direction or destination of exports.
The SADC Protocol on Trade signed in 1996 aims to liberalise intra-regional
trade by eliminating barriers to trade, easing customs procedures, harmonising
trade policies and prohibiting unfair business practices (SADC, 2022). The proto-
col provided the foundation for the formation of the SADC FTA1 through a phased
programme of tariff reduction which began in 2001. The FTA was achieved in
August 2008, when minimum conditions were attained. By 2008, 85% of intra-
regional trade among the partner states attained zero duty. Maximum tariff liber-
alisation was, however, only attained at the beginning of 2012, when the tariff
phase-down process for sensitive products was completed (SADC, 2022).
In total, 13 out of the 16 SADC member countries are part of the FTA, whilst
Angola, DRC and Comoros did not join. Malawi, Zimbabwe and Tanzania were
148 Foreign Trade Review 59(1)
the only countries that were given derogations expiring latest in 2015. The objec-
tives of the SADC FTA are inter-alia to increase domestic production, create more
business opportunities, increase the level of intra-regional imports and exports,
and improve access to cheaper inputs and consumer goods (SADC, 2022).
Table 1 shows the level of intra-trade before and after the full establishment of
the SADC FTA in 2012. Total SADC exports and imports as a percentage of
SADC trade with the rest of the world have only risen to 21% and have increased
by less than five percentage points since 2001. The finalisation of SADC FTA and
introduction of zero-rated tariff lines in 2012 has done very little to spur regional
exports and imports. From 2013–2020, exports increased by four percentage
points whilst imports by 0.5 percentage points. More than 50% of what is exported
in the region comes from South Africa even though the country’s share of SADC
intra-imports has been low and never exceeded 20%. South Africa is the only
country whose exports into the region increased though marginally by six percent-
age points from 53% in 2012. For the past eight years since 2013, no SADC
country increased its imports from the region by an average of three percentage
points (International Trade Centre [ITC], 2022).
Although SADC continues to import and export more than 75% of its goods
from countries outside the region, the share traded with traditional markets like
the European Union (EU) and the United State of America (USA) has been fall-
ing. This is despite the existence of preferential trade arrangements such as eco-
nomic partnership agreements with the EU and the African Growth and
Opportunity Act (AGOA) with the USA. Exports to the EU fell from an average
of 35.1% for the period 2001–2011 to 19.7% for the period 2012–2020. For the
same periods, imports also fell from 31.5% to 24.1%. In the case of the USA,
Table 1. SADC Intra-Trade Averages, 2001–2020.
2001–2007 2008–2012 2013–2020
Exports Imports Exports Imports Exports Imports
Angola 1.7 4.7 7.7 4.9 3.6 2.5
Botswana 4.9 20.4 3.9 15.2 3.4 14.8
DRC 0.4 3.8 3.3 5.2 3.5 6.1
Eswatini 7.8 8.5 3.7 4.7 4.1 4.0
Lesotho 0.9 3.7 1.1 3.8 0.8 3.5
Madagascar 0.5 1.2 0.2 1.1 0.4 0.9
Malawi 1.4 4.0 0.9 3.4 0.6 2.3
Mauritius 1.6 2.8 1.0 1.4 1.1 1.5
Mozambique 3.3 5.4 2.3 5.1 2.9 7.2
Namibia 8.9 13.3 9.2 13.8 6.7 15.3
Seychelles 0.1 0.5 0.2 0.3 0.04 0.3
South Africa 44.2 9.1 52.9 16.7 59.2 18.1
Tanzania 2.0 2.8 2.8 3.0 2.3 2.0
Zambia 6.0 9.4 5.1 10.3 4.9 12.8
Zimbabwe 16.2 10.3 5.6 11.1 6.5 8.7
SADC region 15.6 19.2 17.6 20.2 21.1 20.7
Source: International Trade Centre (ITC) TradeMap, 2022.

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